City stalling General Iron probe, feds say while threatening to withhold money

Mayor Lori Lightfoot’s administration has blown deadlines for document requests related to the federal civil rights investigation around General Iron, potentially jeopardizing tens of millions of dollars in housing-related U.S. government grants to the city.

In February, U.S. Department of Housing and Urban Development officials asked the city to turn over documents as they investigate a complaint of discriminatory zoning and land-use practices by the city, a charge triggered by the Lightfoot Administration’s agreement with General Iron that helped move the car-shredding operation out of white, affluent Lincoln Park to a Latino-majority area of the Southeast Side. The agency asked the city to turn over the material by early March.

Lightfoot has put the permitting of that Southeast Side location on hold but the housing agency is still investigating whether the city’s actions are emblematic of discriminatory practices. Though city officials say they are working on the documents request, a letter sent by a HUD official in Chicago last week came with a warning.

“Regulations require that the City provide HUD access to this information,” HUD’s Kimberly Nevels said in a May 17 letter. “HUD is authorized to effect compliance with this request by initiating an administrative proceeding or referring this matter to the Department of Justice for enforcement.”

The letter closes with Nevels telling city lawyers that the agency, which provides more than $100 million in funding to Chicago each year, can hold up the federal money, which includes Community Development Block Grant dollars.

“Failure to cooperate with this request for information may constitute noncompliance [with federal law] affecting the City’s receipt of HUD funds,” Nevels, who declined to comment, said.

A Chicago plan for spending HUD grants from 2020 through 2024 estimated that the agency will provide about $570 million in that period, a city document shows.

Last year, Chicago was estimated to receive about $114 million. More than two thirds of that amount was from community development block grants, which fund wide-ranging initiatives including economic development for low-income communities. The second biggest block is for affordable housing development. Other grants pay for programs addressing homelessness and housing assistance to help low-income people with AIDS.

The funding is separate from money that goes directly to the Chicago Housing Authority, the public housing agency.

The city issued a one-sentence response to the Sun-Times: “The City has been working with HUD to produce records responsive to its request.”

According to Nevels’ letter, the city is concerned with the release of “sensitive documents.”

“We continue to be open to discussing the arrangements for handling sensitive documents,” Nevels said in her statement.

The move of General Iron from its decades-long home in Lincoln Park to a proposed site on the Southeast Side has become a multifaceted controversy for Lightfoot, generating civil rights investigations from HUD and the Environmental Protection Agency, a dismissed federal civil rights lawsuit and, most recently, a more than $100 million lawsuit from General Iron’s owner that says the city reneged on an agreement to help place the metal-shredding operation on the Southeast Side.

In a federal court filing Monday, Reserve Management Group reiterated that the city pushed General Iron out of Lincoln Park to redevelop a former industrial area and also signed a two-page agreement to work with the company on permitting needed to open its relocated operation. The company is asking a federal judge to order the city to issue a final permit for the rebranded Southside Recycling at East 116th Street along the Calumet River.

In the filing, Adam Labkon, whose family sold General Iron to an affiliate of RMG and who holds a stake in that metal-shredding business, said city officials starting with the Rahm Emanuel Administration wanted the operation out of Lincoln Park to make way for new development, a reference to the multibillion dollar Lincoln Yards real estate project that was under way several years ago.

“Beginning no later than 2018, the City pressured General Iron to close its lawfully operated North Side facility because its metal recycling activity was not consistent with the City’s overall development plan for the area,” Labkon said in the filing. “Ultimately, General Iron capitulated to the pressure and sold its assets.”

The city has said it didn’t help relocate the business. Yet, the two-page agreement between the city and the business is central to both RMG’s lawsuit and the HUD civil rights investigation.

“The aim of the complaint is not to deprive the city of much-needed HUD funding,” said Nancy Loeb, director of the Environmental Advocacy Center at Northwestern Pritzker School of Law and a lawyer for Southeast Side community organizers. “It’s to assure the city takes equity and environmental justice concerns into account in its housing policies, which it has not been doing.”

Brett Chase’s reporting on the environment and public health is made possible by a grant from The Chicago Community Trust.